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Beneficial interest and occupation rights for non-owning cohabitant

This content applies to England

Cohabitants' rights to occupy the home.

Occupation status of cohabitant who doesn't own the home

Where a couple are cohabiting and the property is in one name only, the partner who doesn't own the home will, in many cases, not have an automatic right to occupy. The partner who doesn't own the home usually has the status of a bare licensee, ie they are only entitled to remain in the family home as long as the cohabiting owner gives permission. If the owner wants the partner to leave, all that is legally required is 'reasonable notice'. Once the notice expires, the partner becomes a trespasser.

A partner who doesn't own the home, however, may be able to show that they have a beneficial interest, or a contractual or irrevocable licence, or rights by estoppel.

How a partner who doesn't own the home may be able to show they have a beneficial interest in the home

If a partner who doesn't own the home can show that they have a 'beneficial interest' in the family home, they may have a right to occupy the home and/or a right to a share in the value of the property. Establishing a beneficial interest may also give the partner a defence to any action taken by the owner to evict them and may also give them rights that they would not otherwise have in regard to occupation orders and long-term rights to the home. The courts will need to look in detail at the facts of each case in order to establish whether a beneficial interest exists and, if so, what will be the result on each party's interest in the property.The law in this area is extremely complex and the information below should only be used as a general guide.

Definition of beneficial interest

A beneficial interest is an interest in land that gives a person a financial share in a property and/or a right to occupy a property. There are three different ways in which a beneficial interest can arise:

  • by express declaration of interests
  • by resulting or implied trust
  • by constructive trust

Family mediation can help a separating couple to reach an agreement about the interest of the partner who doesn't own the home without going to court.

However, if it is not possible for the couple to come to an agreement, and there is no express declaration of interests (see below), the partner can apply to the court for a declaration of the nature of the trust between them.

Express declaration of interests

The sole owner and their partner may have made an express declaration of how they intended to share the property, by signing a trust deed or a written agreement. For example, if the sole owner put up the money for the deposit and made all the mortgage payments but signed a trust deed stating that their partner would have a one third share in the property, this would always be enforced by the courts, as long as there is no evidence of fraud or mistake.[1]

Resulting or implied trust

A resulting or implied trust occurs where the court holds that the actions of the parties resulted in a trust arising between them. The resulting or implied trust may be established if:

  • the person claiming the beneficial interest has made financial contributions to the purchase of the property, and
  • there was a common intention that they were to have an interest in the property.

For example, if a couple purchased a house in one partner's name with the other partner contributing a lump sum towards the purchase price, the court would be likely to conclude that there was a resulting or implied trust. Where money has been paid, the resulting or implied trust will be presumed to be in proportion to the contributions made unless there is evidence of any intention to the contrary, eg that the property was intended to be shared equally or the money was intended as a loan or a gift.

Constructive trust

A constructive trust occurs where the court holds that the behaviour of the parties is such that the court will regard one party as a trustee for another. The most important form of constructive trust for cohabitants is the so-called 'common intention trust' which arises by operation of law where the parties agree that beneficial ownership should be held in a particular way but do not follow the formalities (eg they do not execute a written declaration of trust) and one of the parties suffers detriment in reliance on the agreement.

Where an informal agreement is relied on, the terms of that agreement must be sufficiently certain for the courts to imply a constructive trust. In one case,[2] the Court of Appeal found that a letter purporting to record a verbal agreement on beneficial interest made between separating cohabitants was sufficient evidence of their intentions regarding the family home despite the acknowledgement in the letter that the agreement was to be finalised at a later date in a formal document (this did not happen). The terms of the agreement were clear and comprehensive enough to form the basis of a binding agreement under which the family home was held on trust by one former partner (who was the sole owner) giving both the right to live in it until a specified event occurred, at which point the other former partner no longer had a right to occupy.

Case law has established that three things are normally necessary to establish such a constructive trust:[3]

  • there must have been a common intention that the non-owner would gain a beneficial interest in the property
  • there must be evidence of express discussions giving rise to the common intention
  • the non-owner must have acted to their detriment by relying on the intention that they would both have a beneficial interest.

The principles applicable to a constructive trust are the same whether the parties are in a relationship such as husband and wife, business associates or friends.[4]

For example, if, after discussions with her partner and reassurances from him that he would always look after her, a woman gave up a secure tenancy and her job in order to live in his house and care for his children from a previous relationship so that he could start a new business, and she paid the bills while money was tight, this could be found to be a constructive trust. This means that even if the partner who didn't own the home has not contributed in financial or equivalent terms to the purchase, they may still be able to establish a beneficial interest.

Establishing a beneficial interest

In many cases, it will not be possible to establish beyond doubt whether a beneficial interest exists, and there may be disagreement between the couple as to what actually happened and what their intentions actually were. In this situation, it will be necessary to apply to the court for a declaration. The court will make a decision on the facts of the case. However, a court may be reluctant to find that a beneficial interest exists, so it will always be necessary to get the opinion of a practitioner experienced in property law.

If a partner who doesn't own the home wants to try to establish a beneficial interest, then they should start proceedings in the county court or the High Court under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. Heterosexual couples who have been engaged in the last three years can also use section 17 of the Married Women's Property Act 1882, and lesbian and gay couples who have had a civil partnership agreement in the last three years can use section 74 of the Civil Partnership Act 2004.

Quantifying financial shares

If the partner who doesn't own the home has successfully established a beneficial interest, then each party's share in the property can be quantified in relation to the value of the property. The value of the respective shares should be decided when the property is sold or when one party buys out the other, not when the couple cease to live together.[5] If one party has stayed in the property and has spent money that has improved its value, this may be taken into account.

The court will look at any express declaration about the shares in the property or, in the absence of such a declaration, may look for evidence of a common intention regarding the shares.

How the partner who doesn't own the home may be able to show they have a contractual or irrevocable licence

It may be possible for the partner who doesn't own the home to argue that they have a contractual or irrevocable licence. A contractual or irrevocable licence may arise if it can be shown that there is a form of contract or agreement between the parties, for example where one partner gives up their home to move into a house which their partner had bought to look after their children on the understanding that they could live there while the children were of school age, or unless some other situation arose which made it unreasonable for her/him to stay in the home.[6]

If a contractual or irrevocable licence is established, then the partner who doesn't own the home can stay until the particular event agreed upon occurs. It should be noted that contractual or irrevocable licences are very difficult to establish, and the distinction between the circumstances giving rise to these licences and a beneficial interest is not always clear.

How a partner who doesn't own the home may be able to show they have rights by estoppel

The partner who doesn't own the home may be able to argue that they have rights to remain by estoppel. For an estoppel to arise, two criteria must be fulfilled:

  • the claimant must have been misled by the owner into believing that they would acquire a beneficial interest in the property, and
  • they must have acted to her/his detriment in reliance on that belief

An example of this might be if the partner who doesn't own the home acted to their detriment to live with the owner of the family home, for example by giving up a job or a home,[7] or if they made regular payments 'towards the house' in order to enable the legal owner to afford keeping it.[8]

If the partner can establish that they have rights by estoppel, the courts may decide on the appropriate remedy, for example by granting them a licence, a tenancy or a financial share in the property.

[1] Goodman v Gallant [1986] Fam 106.

[2] Ely v Robson [2016] EWCA Civ 774.

[3] Lloyds Bank plc v Rosset [1991] 1AC 107 HL, Crossley v Crossley [2005] EWCA Civ 1581.

[4] Gallarotti v Sebastianelli [2012] EWCA Civ 865.

[5] Bernard v Josephs [1982 ] 3 All ER 162.

[6] Tanner v Tanner [1975] 1 WLR 1346.

[7] Ungurian v Lesnoff [1990] 3 WLR 840; see also (1) Davies (2) Davies v Davies [2014] EWCA Civ 568.

[8] Burton v Liden [2016] EWCA Civ 275.

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